Three Percent Solution

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Charitable giving continues to uniquely define the United States when compared to other nations. With many of our clients giving considerable sums to charities each year, we thought our readers would be fascinated and inspired by the following excerpts taken from an article entitled “Philanthropy’s 3 Percent Solution,” written by Adam Meyerson, president of the Philanthropy Roundtable and published in Philanthropy Magazine.

America is the most charitable country on earth. No other country comes close. For the last 50 years, Americans have voluntarily given 2 percent of GDP to charitable causes. In Britain, France, Germany, Japan, Canada, and other major industrial democracies, charitable giving is 1 percent of GDP or less. Americans now give over $300 billion to charity annually. To put that in perspective, consider:

Americans give over $6 billion in major election years to political candidates, parties, 529s, super PACs, etc. Americans routinely give that much to charity every week.

The NFL, MLB, NBA, and NHL will together earn over $24 billion in revenue. Americans give that much to charity every month.

Charitable giving is central to American society. It is the lifeblood of our churches, synagogues, and other religious institutions. It has helped to make our colleges and universities, public as well as private, the best in the world. It is indispensable for the flourishing of the arts, science, and medicine, and the protection of habitat. It provides food for the hungry, care for the sick, shelter for the homeless. Charitable giving is crucial for our democracy, financing think tanks and public policy research across the political spectrum. Name a great issue of public debate in this time of national choice and philanthropy makes possible reasoned arguments on all sides.

Charitable giving also has the potential to do much more for America. Imagine if instead of 2 percent of GDP, Americans gave 3 percent. At the current level of the economy, that would be an additional $150 billion.

What would $150 billion in additional charitable giving do for our country? We can’t say for sure, because the essence of charitable giving is voluntary: donors and foundations make their own decisions, following their own interests and passions and their own convictions about how and where they can best make a difference.

During the next decade, however, there are three great opportunities where a substantial increase in charitable giving would help to achieve breakthrough solutions for national crises.

The first is to provide fresh thinking about how to offer hope and opportunity for low-income families and neighborhoods. The $900 billion spent annually by the federal government on means-tested programs for the poor—such as food stamps, refundable tax credits, housing vouchers, Medicaid, and social services—has dramatically reduced the incidence of hunger, homelessness, and other forms of material poverty. It has also coincided with the collapse of families, the breakdown of the social fabric, and a slowdown in upward mobility. There is not much the government can do to repair the social fabric, put families back together, or restore a sense of optimism that the American Dream is still open for those who work hard. That is primarily the work of cultural institutions and civil society: churches and other religious congregations, mentoring programs, microfinance lenders, character-teaching programs such as youth sports and Scouting. A new infusion of philanthropy focused on social capital could make a huge difference.

The second is to ramp up philanthropic spending on K–12 reform, building on one of the greatest success stories of charitable giving in recent decades: the growth of multiple charter-school and religious-and-other-private-school networks where low-income children excel academically. These proof points, made possible by philanthropy, offer solutions for the crisis in K–12 education. Substantial increases in K–12 giving could take these success stories to scale and overcome the barriers in public policy that prevent public school systems from replicating this success.

A third opportunity for donors is to strengthen important institutions that can no longer depend as much on government funding. For example, the future of our flagship state universities is in jeopardy at a time of tight state budgets and unsustainable tuition increases. Donors are in a position to protect excellence and to drive major reforms on these campuses, such as encouraging more serious teaching of American history. Similarly, private funders can strengthen community colleges with effective track records in career training and upward mobility.

A “3 percent solution” for philanthropy would build on the long American tradition of citizens taking charge of our communities, of individuals stepping up to solve problems without waiting for government to act.

Great insights by Mr. Meyerson! How might his comments influence your charitable giving in 2017?